sp 500 daily outlook thurs 11 may 2016 another potential downleg below 208083 resistance 1811042016

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What happened earlier/yesterday

The U.S. SP 500 Index (proxy for the S&P 500 futures) has staged the expected downward reaction from the 2080/83 weekly medium-term pivotal resistance towards the first short-term downside target (support) at 2054. Yesterday, it printed a low of 2062 in the U.S. session and recorded a decline of 0.9% which is the most since the up move that started from last Friday, 06 May 2016 low of 2036.

Please click on this link for a recap on our previous daily short-term outlook/strategy.

Key elements

• As seen on the daily chart below the current medium-term weekly pivotal resistance of 2080/83, the Index has started to trace out an impending bearish “Head & Shoulders” configuration with its neckline support at 2036.
• Yesterday’s bearish breakout of the downside trigger level of 2074 has now turned into a pull-back resistance of 2075.
• The hourly (short-term) Stochastic oscillator is coming close to an extreme overbought level which suggests limited upside potential at this juncture.
• The significant short-term support remains at 2054 as per defined by the congested minor swing lows area of 09/10 May 2016 and coincides closely with the 61.8% Fibonacci retracement of the current push up from last Friday, 06 May 2016 low to 11 May 2016 high of 2085.

Key levels (1 to 3 days)

Intermediate resistance: 2075

Pivot (key resistance): 2080/83

Supports: 2054 & 2039/36

Next resistance: 2100

Conclusion

Even though the Index has shaped a minor sharp upside reversal (recorded a current gain of 0.4% in today’s European session) from yesterday U.S. session low of 2062, it still remains below the 2080/83 weekly pivotal resistance where we expect another leg of potential decline to materialise to target the next support at 2054. On a break below 2054 may open up scope for a further push down towards 2039/36 (neckline support of the impending bearish “Head & Shoulders” configuration).

Only a clearance above (daily close) 2080/83  is likely to put the bears on hold for a further squeeze up to retest the significant resistance at 2100 (descending trendline from the 17 May 2015 high that has capped the current advance from 11 February 2016 low).

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